Friday, September 4, 2009

Remittances by bank transfer -- a good first step (corrected)

[Correction: My reading of that Treasury language was wrong.U.S. banks will be permitted to send remittances through third-country banks, and at the same time they will be allowed to communicate directly with the Cuban banks to establish who is sending the remittances and who should receive them.We’ll see how this works in practice, but it should be cheaper than some of the methods of sending remittances that have been available to date.It still escapes me why the U.S. government would not allow direct wire transfers of money between U.S. and Cuban banks in both cases discussed here; the legal sending of remittances to Cuba, and Cuba’s payments for shipments of U.S. agricultural exports.]

In addition to ending limits on remittances, President Obama has made it easier to send them.His new regulations will allow direct transfers of funds between U.S. and Cuban banks, so that a guy in Hialeah can go to his bank and transfer money directly to the Cuban bank account of his sister in Camaguey.No middleman, no Western Union, no storefront remittance forwarder, no mule charging 20 percent.

The language is as follows:

“Depository institutions are permitted to set up testing arrangements and exchange authenticator keys with Cuban financial institutions to forward remittances…but may not open or use direct correspondent accounts of their own with Cuban financial institutions.”

That’s a normal, 21st-century arrangement.

So why can’t it apply to the payments for our agricultural exports to Cuba?

When Cuba pays for our exports, our regulations don’t allow the Cuban buyer to wire money to U.S. banks – payments have to be sent through third countries.This makes European bankers happy as they collect fees for handling the transactions and changing money from one currency to another.Sometimes, this scheme delays transactions, and it always adds a few percentage points of cost, needlessly making our exports more expensive and less competitive.

If American banks can send money to Cuban banks, why not let Cuban banks send money to ours, especially since this would benefit U.S. exporters?

12 comments:

Testing Phil Peters' patience and hospitality, the extract from Juan Juan Almeida's book that was posted in Penultimos Días offers a highly personal look at Raul Castro's personality. There is no way to verify its accuracy but it appears plausible in view of RC's behavior when he interrupted the ALBA summit in Venezuela. RC appears to be a rather mercurial fellow reminding one of Jimmy Bond, the character played by Woody Allen in the original Casino Royale.

Peters, I'd be very interested in your thoughts on how increased Cuban American travel and remittances can be used to undermine the regime. Clearly, you know the regime is despicable and your viewpoint is we should use more contact, etc., to undo its control of the populace. Please elaborate.